*see also: InstaTrade trading indicators for USDX

In the first half of the European session on Tuesday, the US dollar index (USDX) is trading around 102.22, extending a third consecutive session of recovery and reaching a near two-week high. The dollar is supported by three factors: a rebound in Treasury yields after a recent slide to three-week lows, solid odds of a December Fed rate hike, and geopolitical tensions in the Middle East that boost safe-haven demand. However, the market is paused ahead of Wednesday's FOMC decision, which limits buyers' aggressiveness.

USDX has bounced from last week's three-week low of 101.45 to 102.22, helped in part by a roughly 3-bp recovery in 2-year Treasury yields and the psychological break of 102.00.

CME FedWatch prices in about an 89.5% chance of a pause at the October 27–28 meeting and an 80% chance of an interest rate hike in December.

Key drivers

Yields have recovered. After a sharp drop to three-week lows amid a flight to safety during the AI-led equity sell-off, the 10-year Treasury yield has stabilized near 4.98%, and the short end of the curve has even ticked up. That has restored some support to the dollar.

*for reference:

The short end of the curve reflects yields on short-term paper (typically up to one year); the long end shows yields on longer maturities (typically 10 years or more).

Curve shape — the relationship between yields at different tenors — helps assess market expectations and economic conditions. In normal times, the curve slopes upward because investors demand a premium for tying up capital in the long term.

Short and long ends react differently to events and policy: the short end is sensitive to the policy rate and near-term expectations, while the long end reflects long-run views on rates and inflation.

Main insight: if the short end rises while the long end does not, the market doubts the sustainability of growth. That can erode dollar support even when rates are formally high. The short-long spread often signals a trend reversal before the regulator explicitly changes policy.

Geopolitics remains relevant. US–Iran negotiations are stalled, and Houthi attacks on Saudi infrastructure continue. On Tuesday, Saudi air defenses intercepted four drones launched toward the country's south, supporting a risk premium and boosting demand for the dollar as a safe-haven asset.

French crisis weighs on the euro. French 10-year OAT yields remain near 2002 highs, and the spread to German Bunds sits at 2011 levels. EUR is trading near 1.1150, which indirectly supports USDX because the euro carries the largest weight in the index.

Brief technical analysis

InstaTrade's composite technical analysis on the 1-hour chart signals "Strong Buy": 19 of 23 applied indicators recommend buying.

Short?term setup improved after the 102.00 break, but a confirmed reversal requires further upside.

• Daily RSI (14) is near 61, in positive territory but not yet overbought — a constructive bullish sign.
• OsMA remains below zero, confirming a weak bearish bias, but the histogram is rising.
• Stochastic sits at elevated levels near the overbought zone, suggesting that short-term impulse has improved but warrants watching for a bearish cross.

EMA 50, 144, and 200 (interpretation):

• H1 EMA200 = 101.86: broken and now acting as support. Holding above maintains short-term bullish momentum.
• H4 EMA200 = 101.33: key support below current levels. As long as the price holds above it, the medium-term bullish case stands.
• D1 EMA50 = 101.08: the price sits well above, confirming the daily uptrend.
• W1 EMA200 = 100.75: long-term support well below — the fundamental uptrend remains intact.

Key events to watch

• Tue–Wed, Oct. 27–28 — FOMC meeting begins. The market expects a pause, but all eyes will be on Fed Chair Kevin Warsh's Wednesday presser.
• Wed, Oct. 28, 18:00 GMT — FOMC decision. If Warsh reaffirms a December rate hike and does not telegraph a pause, the dollar would gain strong fundamental support and could test 102.50–103.00. A dovish tone would ease USD.
• Wed, Oct. 28 — after the close: Alphabet and Microsoft earnings. These reports are an "extraordinarily important" check on recent AI-sector concerns. Strong results could revive risk appetite and weigh on the dollar, while disappointment would increase demand for safe havens.
• Thu, Oct. 29, 12:30 GMT — preliminary US Q3 GDP and PCE price index data. Strong prints would underscore economic resilience and reinforce December hawkish bets.

Conclusion and recommendations

USDX has improved technically by breaking 102.00, but a hawkish Fed cue is needed to confirm a true trend reversal. Key levels: bulls aim for 102.30; bears look to 101.86 (H1 EMA200) and the critical zone 101.08 (D1 EMA50)–100.75 (W1 EMA200).

For short-term traders:

• A confirmed break above 102.00 creates a long opportunity, but use a tight stop-loss order below 101.80. Without a confirmed break of 102.30, gains look corrective.
• Short entries are viable on a return below 101.86 with targets of 101.33 (H4 EMA200)–100.75; set a stop-loss order above 102.30.
• Monitor the FOMC (Oct. 28), Q3 GDP, and PCE price index (Oct. 29) — these are key triggers.

For medium-term investors:

• A pullback into the 101.30–101.00 zone could be used to add long positions tactically if constructive on the dollar, but uncertainty about the end of the Fed hiking cycle calls for caution.

Risk management:

• Expect elevated volatility around the FOMC and inflation releases.
• Use strict stop-loss orders, especially when trading breakouts of key levels.
• Watch Treasury yields, oil prices, and tech earnings for cross-market signals.

This overview is based on public sources and media reports and reflects price dynamics influenced by many factors; risk management and position control are essential.